How To Sniff Out a Fraud

I tend to get a lot of e-mails from people either claiming to have invented the next big thing in alternative energy, or from people who want to know if a particular company has something that seems worthwhile. Generally, I can sniff out the scams and pseudoscientists pretty quickly. There are lots of telltale signs.

In general there will be no patents, nor patents pending. They will often tell tales of having their invention suppressed. A secret catalyst or secret formulation is another frequent theme. (People too often ascribe magical properties to catalysts. Catalysts can speed up a reaction, but they do not allow you to get around the laws of thermodynamics.) Scam companies will often incorporate a hot buzzword into their company name or the name of their technology, like ‘nano…’ (implying nanotechnology). Claims that the technology will solve the world’s energy crisis are all too common. Many times, it simply comes down to “if it seems too good to be true…” However, I normally give people the benefit of the doubt and I investigate further.

Sometimes a scam isn’t easy to sniff out, and sometimes an invention is a real breakthrough. Since I have often been asked about how to sort the wheat from the chaff, I will document a recent investigation into a company that looked promising at first glance. The company first came to my attention via a poster at The Oil Drum who posted a link about a company called AlphaKat. Here was the post:

I have a member on my website board who is pushing really hard biomass gasification as means to save us all. Here’s the company he mentioned earlier with process capable of using everything one can think about:

I checked out some of the videos, which sounded intriguing but highly improbable. Regardless, I did some digging. The technology was invented by a German named Christian Koch. Dr. Koch had teamed with Austrian immigrant Michael Spitzauer to bring the technology to the U.S. Dr. Koch has a U.S. patent pending on the process (United States Patent Application 20050115871). You can see interviews (in English) with both Dr. Koch and Spitzauer here:

I noticed a couple of things when I read through the patent. First, the claims that were being made were that it could turn any biomass into diesel, but the patent seems to indicate that you must start with an oil of some type. The technology sounds very much like thermal depolymerization (TDP), which as we know works (except not on things like woody biomass), but is not economical. It was certainly not a biomass gasification process. However, there is nothing that I am aware of that is capable of unraveling cellulose and turning it into a fuel in 3 minutes. So it definitely sounded too good to be true.

This sounded interesting, so I worked my way to the website of Michael Spitzauer. The website is incredibly cheesy, poorly designed, and full of fractured English. If you dig, you can see that he has made his wife – a former cocktail waitress – a Senior Vice President of the company. Technical expertise among the team seems to be in very short supply. I also spotted the tell-tale buzzword “Nano”-diesel:

At this point, things are starting to smell funny. Digging a little deeper, I found that Spitzauer has been convicted of fraud, and has been involved in multiple shady dealings. He was also scammed by a Nigerian advance fee scheme, so may not be the sharpest knife in the drawer:

In that last link, he says the oil companies are out to get him, and this is why his past has been exposed:

“The big oil companies in Europe and this country have made threats to us, but even if they would do something to our lives, this company will go on,” Spitzauer said. “Our plant works, and we will make diesel for the people.”

But doubts have been raised about the claims made for Green Power’s technology and about Spitzauer’s personal history — a history that includes a fraud conviction in his native Austria, a lengthy extradition battle in a separate case, and the bankruptcy of his previous business venture.

In an interview, Spitzauer, 38, said none of that was relevant to Green Power and its prospects. “What easier way is there to discredit somebody than to look at something in their past?” he said. “We are here for the future.”

So, we have a process that sounds too good to be true and the involvement of a convicted fraudster who is now saying the oil companies are out to get him. Not knowing more, I would steer clear. This all sounds much like the claims that Xethanol was making. Some of their key players had been previously accused of fraud as well. What happened? Their claims fell apart, and Xethanol finally went bankrupt (as I had predicted) because they couldn’t do what they said they could do:

Finally, I should point out that Michael Spitzauer has had a falling out with Dr. Koch. So it is still possible – albeit I think remotely – that Dr. Koch’s original invention is what he claims it is. But, if you want to put the technology to a real test, run some biomass through the machine that is spiked with a radioisotope (maybe C14) that would show up in the product. I will bet money that the spiked carbon doesn’t show up in the hydrocarbon, and that will be the end of that. If I were a prospective investor, I would insist upon such a test.

This particular case turned up a lot of dirt pretty easily once I started digging. It isn’t always that easy. But there are a still a good number of people who are convinced that this is for real. I think it is very telling, though, that skepticism runs high among the chemists and chemical engineers mentioned in the various links. But as I said, one can design tests to prove or disprove the claims.

By Steven on March 20, 2011 at 10:08 am

Hi, Have you done any digging in the public company JBI who also claims to convert dirty mixed plastic to diesel? Seems probable but I am no expert. Thanks for any input you may have.

Good idea your C14 markers. Probably you don’t need to arrive to such a complex test. We have reproduced the chemical reaction in laboratory using a cellulose base biomass, and it took place. How it happened?
As far as I know, the chemical reaction is well known in chemistry, the problem is to transfer it into a reliable industrial process!
Best regards
Giovanni

We have reproduced the chemical reaction in laboratory using a cellulose base biomass, and it took place. How it happened?

But what happened? Wood into pyrolysis oil, or wood into diesel? The former I can believe; that is well-known technology. Pyrolysis oil can then be subsequently upgraded to fuel, but the overall yields aren’t that great.

On a trip to Europe, I had recently the opportunity to talk to a gentleman, who had obviously worked for a while in the Alphakat organization, as he knew many details of the Spitzauer affair, which are all on the Internet anyway. According to him this technology is not even the invention of Dr. Koch but of a Prof. Beyer. I have later googled and found this website in German, which seems to support this.

I used a translation program, with which I could at least understand its contents. As this invention was made in the 1980s, this should be state of the art by now. Several of the other patents listed on the website are no longer valid. Just follow-up on the links. and dig a bit deeper.

The core invention of Dr. Koch is the chamber mixer for the energy input, and in some areas of the world the catalyst.

The man also told me that out of all the shining plants on the website, not one is working on a 24/7 basis or in commercial operation. He mentioned plants in Spain, Italy, Finland, Rumania, Canada, et. al. The duped customers could not do anything, as the plants were sold as “pilot installations” and with the disclaimer that the customer was aware that this was still a work in progress.

I think you cannot even call this fraudulent, as the customers took the risk and lost millions. If it is ethical to work this way, is a different question.

I have tried in vain to get an appointment with the owners of the plant in Tarragona, Spain. And contacting the company in Canada did also not lead to any results, as that plant seems also to be decommissioned. So I gave up on this matter, as I just cannot believe anymore in what is claimed on the website. This looks more like a religion that technology based on facts. People just want to believe.

Going back to the Alphakat website, under above considerations, the claim “Beside of the right analysis of the specifics of each project, as a highlights we would say that our projects are expecting to have a production cost per liter around 23 to 25 euro/cents and a global investment payback of 4 to 6 years.” is obviously pure theory.

Does anybody know, if one of Alphakat’s customers ever produced road-worthy diesel (ASTM D975 or EN590)?I have not heard of any.

He also told me that the process as such is working, just not the way Alphakat is claiming.

All in all it looks like a lot of hype and it is really hard to look through all the smoke and mirrors…..

Hi Robert, Green Power Inc seems to have stayed afloat and are claiming to be commercially ready. Have you re-assessed them more recently or is you opinion still the same? Alphakat has subsequently gone on to build several more plants and they appear to be working. Do you have current information on their claim to be commercially ready? If we can see proof positive of commercial success anywhere I’d be at the front of the line to invest in such a renewable fuel plant.